21 September 2001

Shorter supplies may not mean a higher milk price

By James Garner

HOPES of better milk prices at the farm gate triggered by a winter shortage might be unrealistic, warned industry commentators at this weeks Dairy Event at Stoneleigh.

This is despite a new forecast from dairy co-op First Milk showing that production is set to fall sharply by 6% from late October.

Even that might not be enough to force the price upward, said Francis Mordaunt, of farm business consultant Andersons, at a press briefing on Wednesday.

"The average for the current milk year and next year is likely to stay at 19.4p/litre. This might be as good as it gets.

"One thing that could change is currency. This could push the price up to 20p/litre if the k strengthens against the £. It is forecast to happen, but I will only believe it when it does."

He believes the milk supply trough is likely to be accentuated during November, December and January. "This might lift prices, but it will only be temporary. We need liquid milk, but we can buy product from abroad. The reality is if we push too hard for price increases this might happen."

Jonathan Horrell, communications manager for Milk Link, said a survey carried out by the co-op showed milk supply dropping from the end of October.

"Whether the over-30-month-scheme is working or not, farmers are going to start getting rid of cows because they simply cant house them all." Missed inseminations will exacerbate the shortage from January, when it is likely to reach 7%, he added.

With all the co-ops deep in price negotiations, such a shortfall would improve their bargaining position. But Mr Horrell denied that First Milk was trying to force the dairy companies hand.

"These figures are real numbers. There has been a lot of speculation about how foot-and-mouth will affect supply, but these are real figures. Supply and demand is part of milk price negotiations, so these are relevant."

Jonathan Ovens, vice-chairman of Express Milk Partnership, disagreed with Mr Horrell. "I wouldnt go along with First Milks figures. A survey of our members shows they might produce more milk than expected."

Price negotiations should be completed during October. Zenith said it hoped to have everything tied up by the end of the month, while EMP hoped this round would be finished by the beginning of October.

Barry Nicholls, head of Milk Link, said his group had more demand than supply, but was unwilling to indicate whether prices might rise.

"You wont get a milk price rise unless you ask for it and that applies for processors and producers. I am sure the consumer wouldnt mind paying a bit extra." &#42